Electric rate hike may end with jolt

ComEd customers can defer payment, with interest

State regulators approved a plan Wednesday that allows customers to phase in sharply higher electric bills over three years, but consumer advocates say the program does more harm than good.

The Illinois Commerce Commission voted to require Commonwealth Edison Co. and Ameren Corp., the state's two main electric utilities, to offer consumers a stepped increase in each of the next three years, with the deferred balance to be repaid later with interest. The plan is optional.

The ICC acted in an attempt to limit the pain of higher electric rates that begin next month. After a decade-long rate freeze, bills are expected to rise by 22 percent for ComEd customers, and as much as 55 percent for Ameren customers, in 2007. They could go higher in future years.

Rather than face the full hike in their bills, ComEd customers instead can choose to pay a 10 percent increase in 2007 and an additional 10 percent in 2008 and again in 2009. Those numbers are caps. The actual numbers could be less, depending on future energy auction results.

But the money they saved would have to be paid back over the following three years, 2010 to 2012, plus annual interest of 3.25 percent. For Ameren customers, the phase-in is 14 percent a year.

"This is hugely dangerous for consumers. It means, ultimately, we are going to pay more," said Madeline Talbott, head organizer for the Association of Community Organizations for Reform Now, which works with low-income people to help them keep their utilities.

Talbott predicted that there will be a wave of electric customers shut off in the fourth year of the program, when the deferred payments come due.

The Citizens Utility Board also criticized the plan.

"We don't think this is a good thing for consumers," said David Kolata, executive director of CUB. "It sets up a balloon payment."

With the average residential bill about $60 a month for ComEd customers, the full 22 percent increase would add $13.20. Those taking the phase-in would add less than half that amount--$6 more per month--with the balance, plus interest, due later.

Kolata predicted that few people will sign up for the plan. CUB intends to push the state legislature to refreeze rates when it convenes next year. State House and Senate leaders have proposed alternate plans to either keep rates frozen another three years or phase them in gradually.

The ICC's five commissioners voted unanimously for the phase-in, saying it was an option that some customers would prefer.

"What we did today was soften the blow of something inevitable," said ICC Chairman Charles Box.

Anne Pramaggiore, senior vice president at ComEd, noted that the plan is voluntary and could be useful for people facing immediate financial problems. She also noted that the interest rate charged is quite low.

"It is a choice," she said. "It is an option. It is a tool for customers who want to use it."

Residential electric rates are due to rise dramatically beginning in January, the result of deregulation. State legislators in the 1990s thought that competition would appear in the residential market for electricity by now, holding down prices. That has not happened.

Illinois electric rates were reduced and frozen for a decade when the deregulation plan was adopted. That freeze expires at the end of the year.

ComEd and Ameren bought next year's electricity at an ICC-approved auction held in September. The utilities say the higher prices were inevitable because energy costs have risen, while the frozen charges paid by consumers were low.

On Wednesday, the ICC also approved a plan that allows residential customers to adjust their electric consumption to use less power when prices are high. That can significantly lower utility bills, ICC Commissioner Robert Lieberman said.

The voluntary program allows consumers to get an e-mail, phone call or page when the next day's energy prices are expected to spike. Electricity is typically the costliest on summer afternoons.

"If you give people a day-ahead notification, they have time to respond," said Lieberman, a proponent of the plan.

He said a pilot program in Chicago showed that people were creative in cutting consumption when prices were high.

If notified prices would spike between 1 p.m. and 3 p.m. the following day, individuals might choose to precool their homes with air conditioning just before prices start to rise. It also allows consumers to put off optional tasks, such as using washing machines, until hours when prices are lower.

"It's very few days out of the year that you see a price spike," Lieberman said. But when electricity prices do go up, they can rise quite high, so the savings can be substantial.

"Over the life of the pilot program, on average, households were saving 15 to 20 percent" on their power bills.

The ICC also approved a small increase in the monthly distribution charge for electricity. Utilities said the increase will average less than $1 a month for a typical customer.